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Tesco shares fall 5 percent

Tesco shares fall 5 percent

Quarterly sales turned positive at Tesco for the first time in three years, according to its full year results posted this morning, but profit growth is still elusive as the supermarket continues to invest in competitive pricing. Shares in the supermarket fell 5 percent in early morning trading.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown: ‘There are tentative signs at Tesco that the oil tanker may be starting to turn, but it’s going to take some time before the vessel is ploughing along in the right direction. An uptick in sales in the fourth quarter was much needed, but profits growth is likely to remain muted while the supermarket continues to invest in its pricing proposition. 

The cost of a typical Tesco shop fell by 3 percent over the year, and the discounters Aldi and Lidl are going to keep up the pressure on the supermarket to make prices even keener. The performance of online and convenience channels were conspicuous by their absence in today’s results, as was any guidance on what to expect going forwards. 

Tesco has made good progress in rebuilding its customer appeal, with lower, simpler pricing, better availability and refreshed ranges. As a result customers are returning in numbers and transaction numbers are on the rise once more. However shareholders are going to have to wait for this feed through to the bottom line, and while they can see what has been achieved over the last year, they are probably scratching their heads about what the plan is from here on in. Tesco remains a stock for recovery investors who are willing to be patient in waiting for a turnaround, and are prepared to stomach setbacks along the way.’

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